CONSOLIDATED INTERIM REPORT FOR Q2 AND 6 MONTHS OF Silvano Fashion Group

Transcription

1 CONSOLIDATED INTERIM REPORT FOR Q2 AND 6 MONTHS OF 2013 Silvano Fashion Group

2 AS Silvano Fashion Group Consolidated Interim Financial Report for Q2 and 6 months of 2013 (unaudited) (translation of the Estonian original)* Beginning of the reporting period 1 January 2013 End of the reporting period 30 June 2013 Business name AS Silvano Fashion Group Registration number Legal address Tulika 15/17, Tallinn Telephone Fax info@silvanofashion.com Website Core activities Design, manufacturing and distribution of women s lingerie Auditor AS PricewaterhouseCoopers * This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

3 Contents Management Report... 3 Declaration of the Management Board... 9 Consolidated Statement of Financial Position Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Interim Report Note 1 Summary of significant accounting policies Note 2 Trade and other receivables Note 3 Inventories Note 4 Property, plant and equipment Note 5 Trade and other payables Note 6 Equity Note 7 Earnings per share Note 8 Revenue Note 9 Transactions with related parties Note 10 Operating segments

4 Management Report General information about AS Silvano Fashion Group AS Silvano Fashion Group (hereinafter the Group ) is an international lingerie distribution group involved in the design, manufacturing and marketing of women s lingerie. The Group s income is generated by sales of Milavitsa, Alisee, Lauma Lingerie, Laumelle and Hidalgo branded products through wholesales channel, franchised sales and own retail operated under the Milavitsa and Lauma Lingerie retail chains. Key sales markets for the Group are Russia, Belarus, Ukraine, other CIS countries and the Baltics. The parent company of the Group is AS Silvano Fashion Group (hereinafter the Parent company ), which is domiciled in Estonia. AS Silvano Fashion Group registered address is Tulika 15/17, Tallinn, Estonia. The shares of AS Silvano Fashion Group are listed on the Tallinn Stock Exchange and on the Warsaw Stock Exchange. As of 30 June 2013, the Group employed people (as of 31 December 2012: people). The Group comprises the following companies: Location Main activity Parent company AS Silvano Fashion Group Estonia Holding Ownership interest Ownership interest Entities owned by Silvano Fashion Group SP ZAO Milavitsa Belarus Manufacturing and 81.12% 81.12% wholesale AS Lauma Lingerie Latvia Manufacturing, 100% 100% wholesale and retail ZAO Linret Russia Wholesale 100% 100% France Style Lingerie S.a.r.l. France Holding 100% 100% OÜ Linret EST Estonia Holding 100% 100% SIA Linret Latvia Holding 100% 0% OOO Torgovaja Kompanija Milavitsa Ukraine Wholesale 100% 100% ZAO Stolichnaja Torgovaja Kompanija Milavitsa Russia Wholesale 50% 50% SOOO Torgovaja Kompanija Milavitsa Belarus Retail and wholesale 50% 50% Milavitsa-logistik OOO Belarus Logistics 50% 50% Entities owned by Milavitsa OAO Yunona Belarus Manufacturing and 58.33% 58.33% wholesale ChP Gimil Belarus Manufacturing and 100% 100% wholesale ZAO Stolichnaja Torgovaja Kompanija Russia Wholesale 50% 50% Milavitsa SOOO Torgovaja Kompanija Milavitsa Belarus Retail and wholesale 50% 50% Milavitsa-logistik OOO Belarus Logistics 50% 50% 3

5 Selected Financial Indicators Summarized selected financial indicators of the Group for 6 months 2013 compared to 6 months 2012 and compared to were as follows: in thousands of EUR 6m m 2012 Change Revenue % EBITDA % Net profit for the period % Net profit attributable equity holders of the Parent company % Earnings per share (EUR) , % Operating cash flow for the period % in thousands of EUR Change Total assets % Total current assets % Total equity attributable to equity holders of the Parent company % Loans and borrowings % Cash and cash equivalents % Margin analysis, % 6m m 2012 Change Gross profit % EBITDA % Net profit % Net profit attributable equity holders of the Parent company % Financial ratios, % Change ROA % ROE % Price to earnings ratio (P/E) % Current ratio % Quick ratio % Underlying formulas: EBITDA = net profit for the period + depreciation and amortisation + net financial income + income tax expense + gain on net monetary position Gross profit margin = gross profit / revenue EBITDA margin = EBITDA / revenue Net profit margin = net profit / revenue Net profit margin attributable to equity holders of the Parent company = net profit attributable to equity holders of the Parent company / revenue ROA (return on assets) = net profit attributable to owners of the Company for the last 4 quarters/ average total assets ROE (return on equity) = net profit attributable to owners of the Company for the last 4 quarters/ average equity attributable to equity holders of the Company EPS (earnings per share) = net profit attributable to owners of the Company/ weighted average number of ordinary shares Price to earnings ratio = Share price at the end of reporting period/earnings per share, calculated based on the net profit attributable to owners of the Company for the last 4 quarters Current ratio = current assets / current liabilities Quick ratio = (current assets inventories) / current liabilities 4

6 Business environment Silvano Fashion Group with its brand portfolio is a recognized market leader in the lingerie segment in Russia, Belarus, Ukraine, has exceptionally strong foothold in other Russian-speaking countries (including Kazakhstan and Moldova) and is a recognized player in the Baltic consumer markets. As pointed out by several intimate apparel producers, the cold weather impacted the sales in the Q1, but we see that Q2 has somewhat leveled out the weather-related excuses. What we actually saw during Q2 was the reduction of inventories both in-house (Milavitsa and Lauma brands), but also the reduction of the inventories of our franchise partners, that is reflected by the improved receivables of Silvano Fashion Group. Overall, H sales measured by quantity was somewhat weaker than planned, but in monetary terms exceeded our expectations. Looking more specifically at our core markets, Russia s sales have remained stable vis-à-vis H Our local competitors are dropping the enthusiasm on extensive growth plans for the current year. For the last 6 months, the Central Bank of Russia s (CBR) refinancing rate has remained high (CBR left the main policy rates unchanged in its June 10 meeting in responds to remaining inflationary pressures), referring to high lending cost, hence also lower consumption of the Russians. Further to this, the private deposits in Russia show a tendency of growth that refers to more cautionary spending in light of uncertainties. Nevertheless, our core brands Milavitsa and Lauma are doing relatively well in this environment. When we look more deeply into the changing structure of retailing (opening of new shopping centers, including also in the regions) this explains our continuous expansion of the store count in the country. Quantitatively, Russia, our core market in terms of total sales and total number of stores (375 stores in total), showed thousand EUR in sales for H compared to thousand in H Going forward, tighter access to credit, via higher interest rates and the likelihood of more prudent lending practices by banks, will translate to weaker household consumption. Belarus rides on the tides of strong local currency and expanding private household consumption. Thanks to the own retail network in the country, we have been able to enjoy better margins from the business in both local currency and in Euro terms. Since it is our second-largest (home) market, its net monetary effect on our Profit and Loss statement is significant. Simply said, we sell more like-for-like basis both in units as well as in monetary terms. In Belarus, the Group operates directly and via franchise a total of 56 stores. Our sales in Belarus totalled thousand EUR for H compared to thousand in H The country s GDP growth during H compared to H stood at 1.4% according to Belstat. Ukraine, Kazakhstan and Moldova showed good dynamics in H We experienced growth in sales, in number of store openings and in sales volumes in all three regions. Given the significance of Kazakhstan and Moldova in the growth formula, the management of the company devotes more time to these regions in the near future. Ukraine with its 92 franchise stores of Milavitsa and Lauma Lingerie generated net sales of thousand EUR in H1 2013, compared to thousand EUR in H Baltic economies continue performing well. According to Swedbank estimates, the Baltic States shall outperform the rest of the EU, with Estonia, Latvia and Lithuania GDP growth estimates for 2013 of 3.3%, 4.3% and 4.0%, respectively. The Group operates directly and indirectly via franchise 39 stores in the region, whereas our sales there totalled thousand EUR in H On the store openings, H the net increase (including openings and store closures primarily due to relocations) for Milavitsa stores was 46 units and 6 units under the Lauma Lingerie brand. The Group therefore operated directly and via franchise a total of 636 stores (net increase of 52 stores compared to end of 2012). Total geography of our franchise partners now covers more than 20 countries, including Milavitsa and Lauma Lingerie branded stores. Financial performance Positive effect of the devaluation on the cost side has been leveled out by increased expenses for labor, outsourcing, and utilities and to some extent materials sourced from Belarus. Group applies hyperinflationary accounting rules according to IAS 29 on business conducted in Belarus. The Group`s sales amounted to thousand EUR during H1 2013, representing a 5.3% increase as compared to the same period of previous year. Overall, wholesales increased by 4.0% and retail sales by 12.2%. The Group s reported gross profit margin during Q2 improved (compared to Q1) hence H total was 33.9%, reported gross margin was 38.8% in the respective period of previous year. Consolidated operating profit for H amounted to thousand EUR, compared to thousand EUR in H The consolidated operating profit margin was 15.8% (21.7% in H1 2012). 5

7 Consolidated net profit attributable to equity holders of the Parent company amounted to thousand EUR in H1 2013, compared to thousand EUR in H1 2012; net profit margin attributable to equity holders of the Parent company was 11% against 14.7% in H Financial position As of 30 June 2013 consolidated assets amounted to thousand EUR representing an increase of 14.3% as compared to the position as of 31 December Trade and other receivables increased by thousand EUR as compared to 31 December 2012 and amounted to thousand EUR as of 30 June Inventory balance decreased by 520 thousand EUR and amounted to thousand EUR as of 30 June Changes in trade debtors and stock balance were in line with the seasonality trend of the business. Equity attributable to equity holders of the Parent company increased by thousand EUR and amounted to thousand EUR as of 30 June Current liabilities increased by thousand EUR during H Current and non-current loans and borrowings increased by 90 thousand EUR to 137 thousand EUR as of 30 June Sales structure Sales by markets 6m m m m 2012 Change in thousands of EUR % from sales % from sales Russia % 60.8% Belarus % 23.7% Ukraine % 6.1% Baltics % 2.8% Other markets % 6.6% Total % 100.0% The majority of lingerie sales revenue during H in the amount of thousand EUR was generated in Russia, accounting for 59.9% of total sales. The second largest market was Belarus, where sales reached thousand EUR, contributing 24.0% of lingerie sales (both retail and wholesale). Out of the thousand EUR sales in the other markets major part is attributed to Kazakhstan and Moldova. Sales by business segments 6m m 2012 Change 6m 2013 % from sales 6m 2012 % from sales in thousands of EUR Wholesale % 84.5% Retail % 15.2% Other operations % 0.3% Total % 100.0% During H wholesale revenue amounted to thousand EUR, representing 83.5% of the Group s total revenue (H1 2012: 84.5%). The main wholesale regions were Russia, Ukraine, Belarus, Kazakhstan and Moldova. Total lingerie retail sales of the Group in H amounted to thousand EUR, representing a 12.2% increase as compared to the previous year. As of 30 June 2013 there were altogether 636 Milavitsa and Lauma branded shops. Own retail operations were conducted in Belarus and Latvia. As of the end of H the Group operated 60 own retail outlets. As of 30 June 2013, there were 544 Milavitsa branded shops operated by Milavitsa trading partners in Russia, Ukraine, Moldova, Kazakhstan, Uzbekistan, Kyrgyzstan, Latvia, Azerbaijan, Armenia, Germany, South Africa, Lithuania, Estonia, Georgia, United Arab Emirates, Iran, Slovenia, Belgium and Italy. Additionally, as of 30 June 2013, there were 32 Lauma Lingerie retail outlets operated by Lauma Lingerie trading partners in Lithuania, Latvia, Estonia, Belarus and Albania. For Lauma Lingerie, the Group expects further openings in Russia in the near future. 6

8 Investments During 6 months 2013 the Group s investments into property, plant and equipment totaled thousand EUR. Main investments were made into equipment and facilities to improve logistic facilities and maintain effective production for future periods. Personnel As of 30 June 2013, the Group employed employees including 399 in retail. The rest were employed in production, wholesale, administration and support operations. Total salaries and related taxes during 6 months 2013 amounted to thousand EUR. The remuneration of key management of the Group, including the key executives of the subsidiaries, totaled 391 thousand EUR. Decisions made by governing bodies during 6 months 2013 On 28 June 2013 Silvano Fashion Group held its regular Annual General Meeting of Shareholders. The Meeting adopted following decisions. The Meeting approved the 2012 Annual Report. The Meeting decided to distribute dividends in the amount 0.10 EUR per share (record date , paid out on ). The Meeting decided to reduce the share capital of the Company by reducing the nominal value of the shares by 0.10 EUR per share (record date , to be paid out after the registration of the capital reduction is completed) and amend the Articles of Association accordingly. The Meeting decided to adopt a share buy-back program in the following: effective period until ; maximum number of shares to be acquired not more than 400,000; maximum share price 2.50 EUR per share. The Meeting decided to recall Mr. Pavel Daneyko from the Supervisory Board due to the expiration of his term, and appointed Mr. Mart Mutso as the new Supervisory Board member. The Meeting decided to re-appoint AS PricewaterhouseCoopers as the Group`s auditor for financial year In June, Silvano Fashion Group established a 100% subsidiary in Latvia (SIA Linret) for holding purposes. At the date of the issuance of the report, the company had no commercial activities. Shares of AS Silvano Fashion Group As of 30 June 2013 registered share capital of AS Silvano Fashion Group amounted to thousand EUR divided into ordinary shares with a nominal value of 0.40 EUR each. The share register is electronic and maintained at the Estonian Central Register of Securities. The Company has been listed on Tallinn Stock Exchange main list (since ) and on Warsaw Stock Exchange (since ). As of 30 June 2013 AS Silvano Fashion Group had shareholders (as of 31 December shareholders). As of 30 June 2013 shareholders, whose interest in AS Silvano Fashion Group exceeded 5% included: Name Number of shares Shareholding Major shareholders % SEB PANK AS_NON-RESIDENT RETAIL CLIENTS % KRAJOWY DEPOZYT PAPIEROW WARTOŠCIOWYCH S.A. [J] % Other shareholders % Total number of shares % As of 31 December 2012 shareholders whose interest in AS Silvano Fashion Group exceeded 5% included: Major shareholders % SEB PANK AS_NON-RESIDENT RETAIL CLIENTS % TOOMAS TOOL % KRAJOWY DEPOZYT PAPIEROW WARTOŠCIOWYCH S.A. [J] % Other shareholders % Total number of shares % 7

9 Share price development and turnover on the Tallinn Stock Exchange during H (EUR) During H the highest and lowest prices of the AS Silvano Fashion Group` share on the Tallinn Stock Exchange were 2.92 EUR and 2.50 EUR, respectively /1/13 1/14/13 1/27/13 2/9/13 2/22/13 3/7/13 3/20/13 4/2/13 4/15/13 4/28/13 5/11/13 5/24/13 6/6/13 6/19/ Volume SFG1T share price 120% 115% 110% 105% 100% 95% 90% 1/1/13 1/14/13 1/27/13 2/9/13 2/22/13 3/7/13 3/20/13 4/2/13 4/15/13 4/28/13 5/11/13 5/24/13 6/6/13 6/19/13 SFG1T share price TALSE Share price development on the Warsaw Stock Exchange during H (PLN) During H1 2013, the highest and lowest prices of the AS Silvano Fashion Group` share on the Warsaw Stock Exchange were PLN and PLN respectively /1/13 1/14/131/27/13 2/9/13 2/22/13 3/7/13 3/20/13 4/2/13 4/15/134/28/135/11/135/24/13 6/6/13 6/19/ Volume SFG Warsaw 99% 97% 95% 93% 91% 89% 87% 85% 1/1/13 1/14/13 1/27/13 2/9/13 2/22/13 3/7/13 3/20/13 4/2/13 4/15/13 4/28/13 5/11/13 5/24/13 6/6/13 6/19/13 SFG Warsaw WIG 20 8

10 Declaration of the Management Board The Management Board of AS Silvano Fashion Group has reviewed and approved Consolidated Interim Financial Report for Q2 and 6 months of 2013 (hereinafter the Interim Report ). Members of the Management Board confirm that according to their best knowledge the Interim Report gives a true and fair view of financial position of the Group, its financial performance and its cash flows in accordance with International Financial Reporting Standards, as adopted by EU, and IAS 34 Interim Financial Reporting. Furthermore, Members of the Management Board confirm that in their opinion the Interim Report provides a fair review of significant developments in the Group's activities that occurred during the reporting period and their impact and describes significant risks and uncertainties that may affect the Group during future reporting periods. The Interim Report has not been audited or otherwise reviewed by the auditors. Märt Meerits Member of the Management Board 13 August 2013 Aleksei Kadõrko Member of the Management Board 13 August

11 Consolidated Statement of Financial Position in thousands of EUR Note ASSETS Current assets Cash and cash equivalents Prepayments Trade and other receivables Inventories Total current assets Non-current assets Long-term receivables 1 1 Investments in associates Available-for-sale investments Deferred tax asset Intangible assets Investment property Property, plant and equipment Total non-current assets TOTAL ASSETS LIABILITIES AND EQUITY Current liabilities Borrowings Trade and other payables Tax liabilities Total current liabilities Non-current liabilities Deferred tax liability Total non-current liabilities Total liabilities Equity Share capital Share premium Treasury shares Statutory reserve capital Other reserves 0 0 Unrealised exchange rate differences Retained earnings Total equity attributable to equity holders of the Parent company Non-controlling interest in equity Total equity TOTAL EQUITY AND LIABILITIES

12 Consolidated Income Statement in thousands of EUR Note Q Q m m 2012 Revenue Cost of goods sold Gross Profit Distribution expenses Administrative expenses Other operating income Other operating expenses Operating profit Currency exchange income/(expense) Other finance income/(expenses) Net financial income Profit (loss) from associates using equity method Profit before tax and gain/(loss) on net monetary position Income tax expense Profit before gain/(loss) on net monetary position Gain (loss) on net monetary position Profit for the period Attributable to : Equity holders of the Parent company Non-controlling interest Earnings per share from profit attributable to equity holders of the Parent company, both basic and diluted (EUR) 7 0,10 0,11 0,19 0,25 Consolidated Statement of Comprehensive Income in thousands of EUR Note Q Q m m 2012 Profit for the period Exchange rate differences attributable to foreign operations Total comprehensive income for the period Attributable to : Equity holders of the Parent company Non-controlling interest

13 Consolidated Statement of Cash Flows in thousands of EUR 6m m 2012 Cash flow from operating activities Profit for the period Adjustments for: Depreciation and amortization of non-current assets Share of profit of equity accounted investees (Gains)/ losses on the sale of property, plant and equipment 0-25 Net finance income / costs Gain / loss on net monetary position Income tax expense Change in inventories Change in trade and other receivables Change in trade and other payables Interest paid Income tax paid Net cash from operating activities Cash flow from investing activities Interest received Dividends received Proceeds from sale of property, plant and equipment Proceeds from repayments of loans granted Acquisition of property, plant and equipment Acquisition of intangible assets Net cash used in/from investing activities Cash flow from financing activities Proceeds from borrowings Repayment of borrowings Dividends paid Net cash used in/ from financing activities Increase in cash and cash equivalents Cash and cash equivalents at the beginning of period Effect of hyperinflation on cash Effect of translation to presentation currency 781 Effect of exchange rate fluctuations on cash held Cash and cash equivalents at the end of period

14 Consolidated Statement of Changes in Equity in thousands of EUR Share Capital Share Premium Treasury shares Statutory reserve capital Other reserves Unrealised exchange rate differences Retained earnings Total equity attributable to equity holders of the Parent company Noncontrolling interest Total equity Balance as at 31 December Effect of hyperinflation on opening balances Profit for the period Other comprehensive income for the period Total comprehensive income for the period Transactions with owners, recognised directly in equity Increase in statutory reserve capital Change in non-controlling interest Dividends paid Dividends declared Total transactions with owners, recognised directly in equity Balance as at 30 June Balance as at 31 December Effect of hyperinflation on opening balances Profit for the period Other comprehensive income for the period Total comprehensive income for the period Transactions with owners, recognised directly in equity Dividends paid Dividends declared Total transactions with owners, recognised directly in equity Balance as at 30 June

15 Notes to the Interim Report Note 1 Summary of significant accounting policies AS Silvano Fashion Group is a company registered in Estonia. This Interim Report of the Group is prepared for the reporting period ended 30 June 2013 and comprises parent company and its subsidiaries. The principal accounting policies applied in the preparation of this Interim Report are set out below. The policies have been consistently applied to all the years presented unless otherwise stated. The Interim Report has not been audited or reviewed by external auditors. Basis for preparation This Interim Report of AS Silvano Fashion Group for 6 months 2013 ended on 30 June 2013 has been prepared in accordance with IAS 34 Interim financial reporting as adopted by the European Union. The Interim Report should be read in conjunction with the Annual Report for the financial year ended on 31 December 2012, which have been prepared in accordance with IFRS as adopted by the European Union. Accounting policies applied are consistent with those of the Annual Report for the financial year ended on 31 December 2012, as described in respective Annual Report. Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings. This Interim Report is comprised in thousands of Euros (EUR). The Group s performance is not significantly affected by any seasonal or cyclical factors. Nevertheless revenue during vacation periods and holidays in CIS countries is usually higher compared to other periods. New standards and interpretations In additions to disclosures already made in the Annual Report for the financial year ended on 31 December 2012 there are no new IFRSs or IFRIC interpretations that are effective for the financial year beginning on or after 1 January 2013 and that would be expected to have a material impact on the group. Note 2 Trade and other receivables in thousands of EUR Trade receivables from third parties Trade receivables from related parties Impairment of receivables Tax prepayments Other receivables Total The fair values of trade and other receivables are not materially different from the carrying values based on the expected discounted cash flows. All non-current receivables are due within more than one year from reporting date. Note 3 Inventories in thousands of EUR Raw and other materials Work in progress Finished goods Other inventories Total

16 Note 4 Property, plant and equipment in thousands of EUR Land and buildings Plant and equipment Other equipment and fixtures Assets under construction Total Cost Accumulated depreciation Net book amount Movements during 6m 2012 Effect of hyperinflation on opening balances Additions Disposals Reclassifications Depreciation Unrealised exchange rate differences Closing net book amount Cost Accumulated depreciation Net book amount Cost Accumulated depreciation Net book amount Movements during 6m 2013 Effect of hyperinflation on opening balances Additions Disposals Reclassifications Depreciation Unrealised exchange rate differences Closing net book amount The Group didn t have any significant binding commitments to purchase property plant and equipment as of 30 June

17 Note 5 Trade and other payables in thousands of EUR Trade payables Accrued expenses Provisions Other payables Total Fair values of trade and other payables are not materially different from book values due to short maturities. Note 6 Equity Shares As of 30 June 2013 and 31 December 2012 registered share capital of AS Silvano Fashion Group amounted to thousand EUR divided into shares with a nominal value of 0.40 EUR each. All shares of AS Silvano Fashion Group are ordinary shares and all are registered. Each ordinary share gives a shareholder one vote in General Meeting of Shareholders. No share certificates are issued for registered shares. The share register is electronic and maintained at the Estonian Central Depositary for Securities. All shares have been paid for. As of 30 June 2013 AS Silvano Fashion Group had shareholders (as of 31 December shareholders). Note 7 Earnings per share The calculation of basic earnings per share for 6 months 2013 (6 months 2012) is based on profit attributable to owners and a weighted average number of ordinary shares. in thousands of shares 6m m 2012 Number of ordinary shares at the beginning of the period Effect of own shares held at the beginning of the period Number of ordinary shares at the end of the period Effect of own shares held at the end of the period Weighted average number of ordinary shares for the period in thousands of EUR 6m m 2012 Profit for the period attributable to equity holders of the Parent company Basic earnings per share (EUR) Diluted earnings per share (EUR) Diluted earnings per share do not differ from basic earnings per share as the Group has no financial instruments issued that could potentially dilute the earnings per share. Note 8 Revenue in thousands of EUR 6m m 2012 Revenue from wholesale Revenue from retail Subcontracting and services Other sales Total

18 Note 9 Transactions with related parties The following parties are considered to be related; a) Shareholders owning, directly or indirectly, a voting power in the parent company or its significant subsidiaries that gives them significant influence over the parent company or its significant subsidiaries and companies under their control. b) Associates - enterprises in which parent company or its subsidiaries have significant influence; c) Members of the Management Board and Supervisory Boards of parent company and its significant subsidiaries and their immediate family members and companies under their control or significant influence. The Group s owners are legal and physical persons and no sole shareholder has control over the Group s activities. According to management s assessment, the prices applied in transactions with related parties did not differ significantly from the market terms. Sales of goods and services in thousands of EUR 6m m 2012 Associates Total Balances with related parties in thousands of EUR Trade receivables from associates Total Benefits to key management of the group in thousands of EUR 6m m 2012 Remunerations and benefits Total Note 10 Operating segments The Group`s operating segments have been determined based on regular reports being monitored and analysed by Management and Supervisory Boards of the parent company on an ongoing basis. The Management and Supervisory Board consider the business primarily from the activity perspective, monitoring separately wholesale and retail activities. - The wholesale segment includes purchasing and production of women s lingerie, and distribution to external wholesale customers and the retail segment. The Group s manufacturing facilities are located in Latvia and Belarus. - The retail segment purchases women s lingerie from wholesale segment, and subsequently sells the lingerie through own retail network in Latvia and Belarus. There is a strong integration between wholesale and retail segments mainly through sales of goods from wholesale segment for subsequent resale in own retail network. The accounting policies of reportable segments are the same. Management estimates that intersegment transactions have been done on arm-length basis. Primary measures monitored by the Supervisory Board are segment revenues, segment EBITDA (which is defined as profit before depreciation, amortisation, net financial income, income tax expense and gain on net monetary position) and segment net profit. These measures are included in the internal management reports that are reviewed by the Management Board and the Supervisory Board. Segment EBITDA is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segment relative to other entities that operate within the industry. Interest income and interest expenses are not core activities of operating segments and are not provided to management and are not evaluated by management as performance assessment criteria of segments performance. Therefore, interest income and interest expenses are presented on net basis. Unallocated revenues include revenues from services, commissions and rental income. 17

19 Operating segments 6m 2013 in thousands of EUR Lingerie retail Lingerie wholesale Total segments Unallocated Eliminations Total Revenue from external customers Intersegment revenues EBITDA Amortization and depreciation Operating income, EBIT Profit from associates using equity method Net financial income Income tax Gain on net monetary position Net profit Investments in associates Other operating segments assets Reportable segments liabilities Capital expenditures Operating segments 6m 2012 in thousands of EUR Lingerie retail Lingerie wholesale Total segments Unallocated Eliminations Total Revenue from external customers Intersegment revenues EBITDA Amortization and depreciation Operating income, EBIT Profit from associates using equity method Net financial income Income tax Gain on net monetary position Net profit Investments in associates Other operating segments assets Reportable segments liabilities Capital expenditures

20 Revenue and non-current assets breakdown by geographical areas Revenues in the table below are based on the geographical location of customers, segment assets are based on the geographical location of the assets. in thousands of EUR Sales revenue 6m 2013 Sales revenue 6m 2012 Non-current assets Non-current assets Russia Belarus Ukraine Baltics Other countries Total